About Dr. Luba Schoenig
Dr. Luba Schoenig
Co-founder, UMushroom
Dr. Luba Schoenig co-founded UMushroom, the investing education platform that hosts the Foundations modules of the Sophron® Analyst Program, in 2020 with Tonia Zimmermann.
Before that she spent fifteen years in structured products and investment solutions in Zurich, at Credit Suisse, Lehman Brothers and Julius Baer. She started as an associate in exotic derivatives at Lehman Brothers in New York, moved to Credit Suisse eighteen months before the bankruptcy, and later covered some of the largest emerging markets clients in private banking. She studied economics at the University of Fribourg, holds a doctorate in quantitative finance, and still lectures on derivatives and asset management in Madrid.
Session lens: Her career ran from pricing exotic options to managing family wealth, and her answers kept returning to the same point: the analyst's basics, read the balance sheet, follow the cash, know the cycle, are what hold up when the market does not.
The conversation
Read the balance sheet first
The oldest skill in finance is still the strongest one.
- When she studied corporate finance in the mid 1990s, finance meant accounting and company valuation. Many of her classmates found it boring. She calls an analyst background the most powerful one you can have when it comes to investing.
- Her test before buying any company is still the same: can it create cash, and what are its real assets worth. Answer those and half the work is done.
- She tied this to current AI valuations, with numbers carrying twelve zeros. The question is not the headline figure but where the projected revenue comes from, and whether it is sane and healthy.
"If you are able to read the balance sheets, if you are able to read the cash flow statements, if you know if the company is creating cash or no and what's the valuation of its effective assets, then you already have half of the work done."
Banking taught her pricing, not wealth
She could value anything and still did not know how to invest.
- At Lehman Brothers she structured payoffs on every asset class in a lightly regulated market. A typical product was the barrier reverse convertible: a worst-of down-and-in put on three stocks, paying a higher coupon because the client takes the risk of the worst performer.
- The private banking years taught the other half. Wealthy families did not time the market. They stayed invested and let compounding work, which most people without a dedicated adviser never do.
- Her generational pattern: the first generation builds the wealth, the second grows it, and the third, more often than not, squanders it.
Time in the market, in numbers
Cash loses, and the cycles are shorter than they feel.
- The return on cash is inflation, which is negative. She believes real inflation in Europe runs at least twice the official figure, judging by what basic goods now cost.
- On UMushroom's investment calculator she ran €200 a month for 45 years. In a savings account at roughly 1.5%, the €108,000 paid in earns about €46,000. At an indicative 8% a year in equities, the same savings add about €963,000, close to €1 million in total.
- Historically, the average crisis lasts one and a half to two years, the average bull market six to seven. The bull market that began in March 2009 ran for twelve years, until COVID.
- Her advice to analysts: study the cycles as well as the companies, because a company's profits are part of a bigger cycle.
Late cycle: keep cash, watch credit
Asked whether to wait out the recession the macro desk expects.
- Nobody can call the turn. It could come in three months, twelve months or three years, and waiting in cash means missing the upside. She keeps part in cash and part invested, with a strategic 30 to 40% in cash to deploy when the market corrects.
- Her worry is circularity in AI: Nvidia tied to Microsoft, Microsoft to Anthropic, and companies taking on credit to keep revenue growing. With long rates rising, a few defaults in Nvidia's supply chain could start a panic.
- In her view every global crisis starts as a credit crisis. She pointed to 2008, when UBS was rescued by the Swiss state and Bear Stearns was taken over, and recommended The Big Short as the account of what happened.
- To stay invested in tech without the highest beta, she has moved towards cash generators such as Microsoft, Amazon and Apple, rather than Nvidia, Micron and the other chip companies.
What a hedge really costs
Protection is insurance, and it is paid for whether or not the fall comes.
- Buying puts only makes sense with a strong view on timing. Otherwise you pay the premium and the market may simply not fall in your window.
- Pricing it live, she found a six-month Apple put struck 20% below the market cost roughly 1.3 to 2% of the position. Full protection at the current price came to roughly 6 to 7%, which is performance you give up. She stressed these were rough numbers.
- In practice people buy out-of-the-money protection at 80 or 90%, or hedge only part of the portfolio. One analyst added that if you want full protection, bonds make more sense than equities plus a hedge.
- On pricing models: every bank starts from Black-Scholes and adjusts it, adding jumps and rare events and running Monte Carlo simulations. The real difference is that each bank uses its own volatility surface, matched to its own book. There is no universal model, and that is part of the secret of trading.
Bonds are not the safe haven they were
Asked whether US Treasuries are still a reliable safe haven, she answered "Oh, god no."
- By the textbook, short rates should rise above long rates and the curve should invert again. But US politics, a debt ceiling that keeps being raised and the government's interest in lower rates all pull the other way.
- In theory bonds and equities should be negatively correlated. In 2022 equities, bonds and crypto all fell together.
- She watches the price of credit risk: the iTraxx indices and the spread between investment grade and high yield. A few defaults on leveraged purchases of semiconductors could set off a spiral.
Stock picking still pays, if the timing is right
Can a junior analyst compete with the large institutions? Yes, with discipline.
- Her example was Alphabet: around 130 three years ago and 324 on the day, with analyst targets as high as 426. On UMushroom's comparison tool it beat both the S&P 500 and the Nasdaq by a wide margin over that period. It had been out of favour, punished as a supposed AI laggard, before Gemini changed the story.
- The time window decides who wins. Over the past year Intel outperformed Palantir and Nvidia. Over three years Palantir led, and over five years Nvidia.
- Her structure is core and satellite: a large part in broad ETFs, plus a high-conviction portfolio of five to ten stocks. Her own tech-heavy portfolio, which she admits goes against every diversification rule, is up more than 200% since inception, much of it on Palantir.
- Short competitions reward big risks, so the UMushroom competitions count performance for only 40% of the score. Another 40% is education, and 20% is the written strategy and investment memorandum. They usually run six to eight weeks, and six months in Spain.
AI takes the boring work, not the judgement
The analysts' biggest fear, and her most direct answer.
- She does not believe AI will spot early-stage companies or replace the questions an investor has to ask. When she started, analysts ordered balance sheets by post and juniors redrew slides at midnight. In her words, the juniors were the AI back then.
- Juniors now start higher up the hierarchy. Firms may hire fewer of them, but the barrier to investing yourself has collapsed. Her student investment club had to pool €500 to make 2.5% trading fees bearable. Ten friends can now start a portfolio together, publish their research and build a following.
- Intuition draws on memory and feeling and sits between the conscious and subconscious mind, so it is not linear and hard to replicate. Emotions cut both ways, panic selling and FOMO, which is one more reason to hold a cash buffer. Her verdict: humans are not replaceable.
"Technology is taking away the very boring works, but you have much more opportunities thanks to technology."
Recommended by Luba
- The Big ShortHer recommendation for understanding how the subprime crisis unfolded, and how the banks lent without checking credit quality.
- UMushroom investment calculatorThe tool she used live to show compounding: monthly savings over 45 years, under conservative, balanced and equity risk profiles. umushroom.com/en/investments/calculator
Sources and further reading
- UMushroomThe investing education platform Luba co-founded in 2020 with Tonia Zimmermann, and home of the Foundations modules. umushroom.com
- Barrier reverse convertiblesThe structured product she worked on at Lehman Brothers: a higher coupon in exchange for a worst-of down-and-in put on a basket of stocks.
- Black-Scholes and the volatility surfaceThe base model every bank adjusts, and the bank-specific volatility surface she called the real difference between trading desks.
- iTraxx credit indicesThe credit risk benchmarks she watches, alongside the spread between investment grade and high yield.
- US 30-year Treasury yieldThe series she checked during the session to place current long rates against the 1981 record. fred.stlouisfed.org/series/DGS30